State auditor fears French military prowess at risk

* Cost-cutting pressures threaten upgrade of armed forces

* Cutting-edge military key to France's big power status

PARIS, July 11 (Reuters) - France risks losing its global military standing if the new Socialist government cuts back on equipment programmes and troop training in an effort to meet deficit targets, the state auditor said on Wednesday.

A cornerstone of the NATO alliance, France was at the forefront of international military action in 2011 in Libya and Ivory Coast but, like many European nations hit by the debt crisis, it has been forced to reduce costs.

Former president Nicolas Sarkozy launched a five-year defence review in 2008 that aimed to cut 54,000 military posts to create a smaller, more mobile army able to respond to modern-day threats ranging from terrorism to cyber attacks.

However, the National Audit Office warned on Wednesday that defence spending was headed for a 4 billion euro (${esc.dollar}4.90 billion) budget gap by the end of 2013.

This was partly due to a shortfall in property sales, a higher-than-expected cost of overseas operations and the failure to budget for NATO operating costs and a new base in Abu Dhabi.

"Despite the successes in Libya and Ivory Coast, the military is not in a position to complete its most difficult objectives," the auditor said, referring to a commitment to maintain a 5,000-strong rapid intervention force and retain the capacity to deploy 30,000 troops within six months.

The six-month Libya operation cost France 370 million euros more than budgeted.

Although it has already eliminated almost 30,000 jobs, the defence ministry has seen its wage bill rise by 1 billion euros. That has reduced the amount available to invest in cutting-edge equipment and troop training days - 20 percent less than forecast.

France's status as a nuclear power and United Nations Security Council member with an effective military has been a bedrock of its defence policy.

Defence Minister Jean-Yves Le Drian has said it would be difficult to cut annual spending of 2 percent of gross domestic product if Paris wanted to remain an international player.

Le Drian is working on a white paper to be released next year which will incorporate a government decision to cut staff by 2.5 percent annually for the next three years as well as reducing operating costs by 7 percent.

More than half of the military's personnel perform administrative and support functions, with just 40 percent in operational and combat roles.

"(We) recommend adopting a method to safeguard the financial and material strength of the military and ensure elements linked to operational capacity are kept to a maximum, including provision of equipment, its availability, and training," the auditor said.

More than 1 billion euros could immediately be saved through measures including reducing wages among senior officers.

Bertrand Ract-Madoux, the head of France's ground forces, told reporters on Wednesday there was little room to make cuts on an operational level without directly affecting performance.

"As soon as you start messing with how an army functions, then the savings become very difficult and painful," he said. (${esc.dollar}1 = 0.8164 euros) (Reporting By John Irish and Patrick Vignal; Editing by Mark Heinrich)